Brent at $69 strengthens fiscal outlook; analysts warn Hormuz disruption could trigger triple-digit surge…
Nigeria’s macroeconomic outlook is getting an unexpected boost as global oil prices climb above the Federal Government’s 2026 budget benchmark of $64.8 per barrel.
With Brent crude trading around $69 per barrel, the price rally is poised to strengthen fiscal revenues, reinforce foreign exchange reserves and deepen exchange rate stability particularly at a time when recent reforms have begun restoring investor confidence.
Energy analysts say geopolitical tensions in the Middle East are the primary driver of the rally. Fears that the United States could take military action against Iran, a major oil producer have injected a risk premium into markets. On Thursday, Brent futures rose 1.4 per cent to $69.34, while West Texas Intermediate gained 1.5 per cent to $64.13 per barrel.
Beyond Iran-related tensions, temporary supply disruptions in Kazakhstan and weather-related outages in the United States have tightened short-term supply conditions.
More dramatically, analysts caution that a full-scale disruption of the Strait of Hormuz, a chokepoint for roughly 20 per cent of global oil flows could send Brent surging to $91 or even $150 per barrel within weeks.
Naira Breaks Key Psychological Level
For Nigeria, where oil accounts for more than 80 per cent of foreign exchange earnings, the rally comes at a strategic moment.
The naira has strengthened below the N1,400/$1 threshold on the official market for the first time in over a year a psychologically important milestone.
According to data from the Central Bank of Nigeria, the Nigerian Foreign Exchange Market (NFEM) rate firmed to N1,396.99/$1 on Thursday from N1,400.48/$1 the previous day. Just weeks earlier, the rate had weakened to above N1,422/$1 in late January.
The parallel market has also reflected improving sentiment. Cowry Asset Management reported a 1.06 per cent appreciation in the informal segment to N1,454/$1, narrowing spreads and reinforcing signs of exchange-rate convergence.
Governor Olayemi Cardoso has maintained that the naira now trades within a narrower, more stable range, with the gap between official and parallel markets shrinking to under two per cent from more than 60 per cent previously.
Reserves Hit Eight-Year High
Nigeria’s external buffers are also strengthening.
Foreign reserves climbed to $46.11 billion as of January 28, 2026 — a 14.45 per cent increase from $40.29 billion in December 2024. The level marks the first time reserves have crossed $46 billion in nearly eight years.
Data from the apex bank show reserves rising by roughly $510 million in just 22 days in January alone, reflecting stronger inflows and improved FX management since the reform of the foreign exchange regime.
Importantly, officials stress that reserve accumulation is being achieved organically — not through additional borrowing — but through improved market functioning, capital inflows and stronger non-oil exports.
Nigeria’s current account surplus expanded by more than 85 per cent in the second quarter of 2025 to $5.28 billion, compared to $2.85 billion in the first quarter, underscoring the strengthening external position.
Capital Inflows Surge
Investor confidence appears to be rebounding sharply. Foreign capital inflows reached $20.98 billion in the first 10 months of 2025 — a 70 per cent increase over total inflows recorded in 2024 and more than four times the $3.9 billion posted in 2023.
Diaspora remittances have also risen by about 12 per cent, aided by policy improvements such as the introduction of the Non-Resident BVN framework designed to channel funds through official platforms.
PPP Signals Naira Undervalued
Managing Director of Financial Derivatives Company, Bismarck Rewane, estimates the fair value of the naira at approximately N1,256 per dollar using the purchasing power parity model. By that measure, the currency remains undervalued by about 11 per cent, suggesting further room for medium-term appreciation if reforms remain consistent.
Rewane noted that currencies typically converge toward PPP-implied values over a five-year horizon.
Oil Output and Corporate Performance
Operational data also point to improved performance in the energy sector.
The Nigerian National Petroleum Company reported revenue of N5.08 trillion in October 2025, up from N4.27 trillion in September. Profit after tax more than doubled to N447 billion from N216 billion in the same period.
Gas production rose to 6,997 million standard cubic feet per day in October, while gas sales climbed significantly. Crude oil output dipped slightly to 1.58 million barrels per day from 1.61 million in September, but the company says production recovery initiatives remain ongoing.
Reform Momentum Key
Economists argue that while high oil prices offer immediate fiscal relief, sustaining gains will depend on policy discipline especially in an election year.
The apex bank has reiterated that it will not return to direct deficit financing, while fiscal authorities have introduced revenue optimisation frameworks and strengthened treasury systems to curb leakages.
For now, the combination of stronger oil prices, rising reserves, narrowing FX spreads and surging capital inflows suggests Nigeria’s external position is more resilient than in recent years.
If geopolitical tensions keep crude prices elevated without triggering global demand destruction Africa’s largest economy could see further consolidation of currency stability and fiscal breathing room in the months ahead.
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